Job Or Income Guarantee (JIG)

The job guarantee has been getting a lot of attention in the blogosphere lately. As Bill Mitchell notes in his latest post, some of this has involved questioning whether the job guarantee should be considered integral to MMT. Other discussion has been about the merits of the job guarantee itself. As far as I am concerned, the first question has been answered in the affirmative by the leading MMTers. In this post, I am not concerned with that issue. I am taking as given that the job guarantee is not only consistent with MMT but part and parcel of it. My concern, following on from my previous post, is with the merits of a job guarantee compared with other policy options.

My motivation in this post and my previous one is very different to that of right-leaning critics of a job guarantee. My emphasis is on finding ways to assist a transition to a society in which people can opt for more free time, if they wish. The likelihood of a high degree of mechanization in production in coming decades creates the potential for such a transition.

My previous post led to outstanding discussion, from divergent standpoints, for which I am grateful. It has motivated me to clarify what I have in mind and the reasons for it. My view is that it would be possible to assist a transition to a society in which individuals are largely free to spend their time as they please through a policy combination that also serves the same macroeconomic functions as the job guarantee. This would involve allowing people to choose either a guaranteed job or a guaranteed basic income.

As is usually the case, there was barely anything I disagreed with in Bill Mitchell’s post. But in the conclusion he presents a challenge, and I think it is a worthwhile one to contemplate:

If you want to propose a coherent body of macroeconomic thought then you have to address the key questions of full employment and price stability.

I agree with this statement for at least two reasons. First, macroeconomics, as a discipline, has largely been about full employment and price stability from the outset. These have been central preoccupations of macroeconomics across the theoretical and political spectrum. To be a viable macroeconomic theory, it is necessary to have explanations for unemployment and inflation that can inform policy prescriptions.

Second, from a normative perspective, the goals – particularly full employment – make sense, in my opinion. Those who want a job in the formal economy should not be prevented from obtaining one simply because of poor macroeconomic management. Given our current understanding of flexible exchange-rate fiat currency systems, it is clear that these two goals can be attained simultaneously through a job guarantee. The job-guarantee wage would place a floor under all other wages, anchoring the price system, while the spend on a ‘price rule’ rather than ‘quantity rule’ would ensure all who wanted a job in the formal economy at that wage could obtain one.

What I want to raise as a possibility, more clearly in this post than my last, is that the attainment of these same goals could be achieved by introducing a ‘job or income guarantee’. I’ll call it a JIG. Under this arrangement, a person could choose for themselves if they wanted to engage in wage labor or have more free time to pursue their own vocation or leisure. It would be possible for the voluntary job guarantee to pay more than the basic income guarantee if that was deemed appropriate through the democratic process, but for simplicity I will just assume they pay the same as it doesn’t really affect the argument. The voluntary job guarantee would be identical in its design to the job guarantee currently proposed by MMTers except that participation would be truly voluntary. The proposal of the MMTers cannot be regarded as truly voluntary because anybody who is unemployed and without an independent income would have little choice but to accept the job-guarantee offer. This would not be the case with the JIG, in which income would be provided unconditionally, irrespective of a person’s decision over whether to participate in the voluntary job-guarantee program.

In addition, as mentioned in my previous post, there might also be other voluntary programs a person could join if they did not want employment in the formal economy but did need assistance in making the transition from wage labor to free time. These voluntary programs could offer facilities for people to participate in various activities not considered relevant to employers in the formal economy, and therefore not relevant to the voluntary job-guarantee program. Examples might include arts and crafts, social groups, amateur theater or musical productions, writing courses, and so on. In the previous post, I lumped all the voluntary activities in together, which obscured the nature of what I was suggesting. I think it is clearer to think in terms of a JIG and then whatever other social facilities are provided can be regarded as part of another set of social policies. Here, I will leave these other voluntary activities aside.

My view is that the JIG could help us work towards numerous goals simultaneously.

1. It would open up the option of free time so that those who were ready to embrace it could do so.

2. This would reduce the size of the labor force, and therefore reduce the amount of employment corresponding to full employment. Those opting out of the voluntary job guarantee would not be included in the labor force.

3. The amount of income provided by the JIG would provide a floor under all wages in the economy in just the same way as a ‘conventional’ job guarantee.

4. I think this floor could actually be more effective as a nominal price anchor than a conventional job guarantee. The reason is that only those who really wanted to work in the formal economy would opt for the voluntary job guarantee. The diligence, effort and quality of work would be better, providing a better source of additional or alternative workers to employers in the broader economy.

5. The JIG would place more pressure on employers in the broader economy to offer decent employment conditions and job opportunities than a conventional job guarantee, because employees would have the additional option provided by the basic income guarantee.

6. The JIG would provide automatic demand stabilization in exactly the same way as the conventional job guarantee.

My reason for thinking that a voluntary job guarantee might provide a more effective nominal price anchor than an essentially compulsory job guarantee (point 4 above) is as follows. Of the people most likely to opt out of the job guarantee, most would fall into two categories: (i) people who don’t want to work; (ii) people who don’t want to work in the formal economy because there are other socially productive things – broadly defined – that they would prefer to do. Included in this group might be home parents, carers, charity workers, hobbyist gardeners, environmentalists, activists, writers, musicians, artists, actors, athletes, computer programmers, people seeking self-education, bloggers (!), etc.

People in category (i), if essentially compelled to participate in a job guarantee, would be the least enthusiastic and diligent in the program, and therefore would actually detract from its nominal price anchor role, because they would not be providing viable alternatives, from the perspective of employers, to those already employed. To the extent their attitude rubbed off on others, the effect might be a lowering of the average “employability” of the job-guarantee cohort. I think, for these individuals, it would be more beneficial if facilities were made available for meaningful leisure activities that might lead, in time, to a desire to mix leisure with more creative or socially productive behavior outside the formal economy. If they chose to participate in such activities, they would be doing so voluntarily, and so would feel less resentment and perhaps be more open to potentially life-enhancing and more socially interconnected experiences.

People in category (ii), if compelled to participate in a job guarantee, might add less of value to society than they could if freed to pursue their own vocations either individually or in voluntary association with others.

In response to my previous post, various objections were raised against my position on the job guarantee. Addressing a few of these objections here may help to flesh out my thinking on the issue.

One point made was the need to be realistic in the kind of social transformation that we could expect to occur in the immediate term. Even though the ultimate aim may be more free time, currently many people are unaccustomed to such freedom and derive much of their sense of order and belonging from employment in the formal economy. For example, Neil Wilson wrote:

JG would provide a lot of people with some sort of purpose. Not everybody has a sufficiently developed sense of internal motivation to allow them to contemplate what they should do with a life free from labour. Just look at the health and mental problems amongst the legions of the early retired. It isn’t easy when our world is so centred around the work relationship.

So first let’s make the work relationship equitable, then, in response to the non-job arguments, we can raise the issue of “what else are they going to do?”

I agree that the challenges many people are likely to face in making the transition from formal employment to free time is highly relevant. My problem with the argument that this therefore calls for a job guarantee rather than a ‘job or income guarantee’ is that it is a backward step specifically in relation to the shift from the current work ethic to an embrace of free time. At the moment, draconian though the current system is, some people have become accustomed to free time, either through extended involuntary unemployment or underemployment. In some cases, maybe for only a small minority, an unintended side effect of this forced break from employment may be that it prompts a reconsideration of personal priorities. What in some cases may initially seem a curse (especially part-time rather than full-time work) may turn out to be a blessing. Not in all cases, certainly, but in some. In this way, there is some change in consciousness that can help to facilitate a transition to a society offering more free time. By placing the onus on the work relationship even more strongly than is already the case, the job guarantee may be counterproductive in this specific sense.

I certainly agree that there would be scope with the job-guarantee program, if implemented as proposed by the MMTers, for us to push for a broadening of what is considered “productive” over time. If the job-guarantee program is introduced, that would seem to be the logical next step in terms of activism. But, equally, it also opens the way for pressure to be exerted in the opposite direction. Strong efforts would undoubtedly be made to eliminate the positive aspects of the job guarantee and turn it into workfare.

Some other commentators addressed political realities. For example, Dan Kervick noted that there is already resentment towards welfare policies let alone a basic income guarantee. Tom Hickey, in contrast, suggested that a negative income tax may be more palatable to many in the U.S. than a job guarantee. I fully acknowledge the relevance of these concerns. Frankly, I don’t know how unpopular either policy approach is likely to be, but I agree the political opposition currently appears formidable. Even so, I think discussion of the relative merits of different policy options remains important. As Bill Mitchell wrote in his post:

Whether the defining elements are politically palatable, attainable, or culturally pleasing is irrelevant in theoretical terms. Ideas are not intrinsically popular – which is where the political domain operates. To be elected you have to be popular. Ideas are also not intrinsically time-bound. Some ideas are developed before anyone will accept them as knowledge (in the sense that the theoretical notions are not inconsistent with reality).

Especially in the age of the internet, our discussions can conceivably have unexpected and unknown effects both now and in the future. Maybe the JIG and even the JG are before their time. We’ll see. But even if they prove unrealistic options this time round, they – or proposals like them – may come into their own at some point in the future.

Equally, the way we design current policy has an influence on the kinds of policies that will be feasible in the future. If we don’t start implementing policies now that begin to encourage a different attitude towards life and a transition to free time, when will it ever be feasible to implement such policies? Fifty or a hundred years down the track, people may still be saying the same thing: “That is for the future, for now we must be realists.” Yet, it has been technically feasible to embrace more free time for quite a while.

I also should briefly address Philip Pilkington’s concern:

I think that modern history has been the history of self-directed people trying to turn other-directed people into self-directed people. I guess that’s what we call ‘Utopian politics’ (Rousseau, Robespierre, Lenin, Marx etc.). Any politics that tries to mold the Nature of Man through institutions. It always ends in despotism.

My view is that the institution wage labor has done as much as any other institution to mold the way people think about their lives. Mechanization is likely to free up time unless we introduce even more institutions to continue the molding of people’s thinking to the ways of wage labor. My suggestion is aimed at giving maximum freedom to choose wage labor or something else. This is no greater an attempt to mold people’s thinking than the current system. It gives people more choice to determine their preferred way of living. If it’s really true that many people prefer to be told what to do, then they may continue to opt for wage labor. Or perhaps they will form voluntary associations with others who are inclined to take leadership roles, preferring to work under their direction.

As I made clear at the outset, there is very little I disagree with in Bill Mitchell’s post, but perhaps the following sentence from the conclusion hints at a difference in our world views, which may explain why I am less enthusiastic than many others about the job guarantee in its currently proposed form:

In terms of the Job Guarantee – my ideological preference is not to have such a capacity. I would prefer everyone to be gainfully employed doing what they love and earning the best wages they could.

I love that sentence except for two words: “employed” and “wages”. My ideological preference is for everyone to be able to do what they love without the compulsion to sell their labor power to an employer in exchange for a wage. This is perhaps what most makes me hesitant to support the job guarantee rather than a ‘job or income guarantee’.

43 thoughts on “Job Or Income Guarantee (JIG)

  1. I love JIG – great new product! People will love it too when the find out about it.

    JIG takes care of all different kind of people and makes them happier than before. Not surprised at all the idea is coming from a person who loves what he does for living and with plenty of free time. :-)

    And people facilitated to do things they love will deliver great and beautiful things accessible for everybody.

  2. Thanks, mate.

    Not surprised at all the idea is coming from a person who loves what he does for living and with plenty of free time.

    It takes one to know one. :-)

    This post is still in the “thinking aloud” vein that I’ve been in lately. If it gets shot down in flames, I suppose the jig will be up. Until then, I will keep jigging.

  3. Good thinking, Peter. It is actually close to Scott Fulwiller’s view as I understand it, which would be more workable in the US politically than Bill’s exclusive JG. The buffer stock would be of those who voluntarily chose to participate in the JG (to be developed in he US) and those who prefer the (already existing in the US) unemployment insurance.

    Also here as a some questions to consider.

    1. What is the world’s largest economy by GDP?

    The US at ~ 14T

    2. What is the second largest economy in the world?

    The “informal economy” made up of transactions not on the books and accounted for in global GDP amounts to an estimated 10T. (I think that this figure may be a gross underestimation.) Some examples of this unaccounted for work is work that is uncompensated, work that is compensated “off the books” in cash, barter, black markets, and criminal activity.

    Economics is based on data that do not necessarily completely or accurately reflect actuality. There is bias in the selection process based on ideology and institutional arrangements. We need to look at these issues with new eyes.

  4. Peter,

    I am not sure that the concept of the formal economy makes sense as you’ve defined it in the context of a job guarantee. You mention such roles as home parents, carers, charity workers, hobbyist gardeners, environmentalists, activists, writers, musicians, artists, actors, athletes, computer programmers, people seeking self-education and bloggers. But if the government is actively participating in the economy as an employer, then the government is partially responsible for defining what is in the formal economy and what is not. If the government decided to pay people to perform any or all of those activities, then they have made those activities part of the formal economy. They might not be part of the private economy, but they are part of the formal economy. People were hired to do all sorts of similar things during the Great Depression. A lot of those things are very socially useful, even though private capital is usually not able to profit from them, and so won’t invest in them. So it’s just a question of what an enlightened society is willing to pay people to do.

    But on the broader question of the JIG, I have to say that my moral and social sensibilities are a little bit ruffled by the concept of an income guarantee.

    I think we really should promote the idea that a society is a group of people bound by mutual obligations and commitments. I personally believe our society should be much more aggressive in making commitments to investing in its members, in providing opportunities for everyone to work, and in delivering to everyone who works the purchasing power for a fair share of our total output of goods and services. And I think we should measure people’s contribution more by the good faith of their efforts and the degree to which their efforts match their capacity, not by the market value of their output. But the people who receive these social benefits owe society something in return.

    It is unfair to ask those who are working to support those who are not contributing, but who are capable of doing so. It is unfair to hand out social benefits to able-bodied people if they are not reciprocating by contributing their own work to the productive efforts that make those benefits possible. To provide an income to people is to provide them with a claim on the output produced by the society. I don’t see why anyone should be given title to such a claim if they are not reciprocating and are instead living solely for themselves. Keeping a society going is hard work. Even preserving and sustaining the things we already have is hard work, apart from whether we want to build more. People need to ask themselves, are they part of the society or not? If they are, they they need to accept the adult responsibility of shouldering a fair share of the work. Maybe some people don’t want to volunteer for the sandbag crew that is fixing the levee. Fine. But then they shouldn’t just drop by for the coffee and doughnuts when the volunteers deliver them to the people who are doing the heavy lifting.

    People should, of course, be free to go their own way. But society doesn’t owe them any support for their purely individualistic pursuits beyond the extent to which those pursuits at least generate externalities that benefit others.

    So sure, if we are able to achieve a greater aggregate share of leisure while satisfying our wants, and a system for distributing that additional leisure equally, that would be great. But I don’t see why we should provide a sort of voucher that lets some people simply opt for leisure on a permanent basis, and receive social support for that decision in the form of real goods and services that owe their existence to the toil of others.

  5. @Dan Kervick

    Dan, JIG’, as I see it, is for:

    - technologically well advanced society where robots replace humans in many areas of production – that’s where evolution leads us.

    - still maintenance of the right amount aggregate demand corresponding to full employment and price stability, exactly like JGP but with the difference that people are free to choose between JGProgram or IncomeGP, where IGP will be still contributing to total output, although in more obscure way (people working, thinking, discovering things they are interested in) or people just trying to find themselves and make their lives more interesting, and useful, participating in specially designated programs.

    - increasing productivity (Peter made very strong case about it)

    The concept is based totally on free choice, therefore I don’t see any unfairness, on the opposite, it is the best progressive idea I’ve ever seen, which has the potential to become reality.

  6. Dan Kervick: I think we really should promote the idea that a society is a group of people bound by mutual obligations and commitments. I personally believe our society should be much more aggressive in making commitments to investing in its members, in providing opportunities for everyone to work, and in delivering to everyone who works the purchasing power for a fair share of our total output of goods and services. And I think we should measure people’s contribution more by the good faith of their efforts and the degree to which their efforts match their capacity, not by the market value of their output. But the people who receive these social benefits owe society something in return.

    What this translates to is that economists should pay attention to what perennial wisdom, philosophy, and the social sciences have to say and have been saying for millennia, instead of isolating themselves in a fantasy world of their own imagination that doesn’t correspond to anything outside of their own small mindedness. Their models are pitifully simplistic and to shape policy that affects billions of people globally is just blatantly irresponsible. I would not want that karma hung around my neck.

  7. “It is unfair to ask those who are working to support those who are not contributing, but who are capable of doing so.”

    If their needs are fulfilled are they supporting those who are not contributing, or is it the fabric of society and its productive system that is supporting everybody?

    Where people are correctly aligned then there is no free rider issue. In the words of Mrs Doyle: ‘some of us like drudgery’.

  8. If their needs are fulfilled are they supporting those who are not contributing, or is it the fabric of society and its productive system that is supporting everybody?

    I think it’s some of both Neil. Consider 100 people who are working together to produce some goods and services, and whose productivity is based on both their own individual efforts and also the social support system and physical infrastructure that they have built up over the years. Suppose all their needs are satisfied by the output. Now suppose they find out that their work is generating a 10% surplus of output, that none of them have any need or desire to consume. The natural result would be that they would agree to reduce their work load and output so that they could still enjoy all the goods and services they actually need and want, but also enjoy more leisure time.

    But suppose now that there are 10 additional people who are not working, but who have a legally binding claim on an equal share of the society’s output. That means the first 100 will have to continue to produce the same surplus they were producing before, and forego the added leisure, so they an provide for those non-workers who have been guaranteed a share of the output. That doesn’t seem fair to me. Isn’t it reasonable to hold that in exchange for their share of the output, those 10 people should be required to contribute some work? Then the whole group of 110 can produce the amount that was being produced originally by the 100, including the surplus that was being provided to the 10, but the first group of 100 can reduce their labor and everybody can enjoy an equal share of leisure.

    I want to add that I don’t think this picture of the 10 non-working folks with the income guarantee is anything like the situation we actually have now in the US. Most of the unemployment in the US is involuntary, and results not from people lazily entitling themselves to the surplus produced by others, but from people who are eager to contribute work, but are not being offered the opportunity to contribute by the society that organizes that work.

  9. A friend of mine often says: ‘Time is a gift given to us all; what we do with it is OUR gift to ourselves’. This friend also says much the same about our capability to think. We don’t determine how much time we have between birth and death, so I am not sure of the idea of our time being ‘free’. Time is free … my friend also says Time is the great librarian, putting everything back in its place ….or a river, washing everything clean and back to the sea!

    So, a little bird gets up from his nest in the morning: should he go about his business according to his nature; go down to the JG queue; or open his mouth like a fledgeling for a JIG? He is hungry!

    Supposing technology takes care of all of his nesting and food needs. Is that going to alter his nature?

    In the end, maybe he just wants to feel content, ‘free as a bird, unchained to the sky-ways’ – fulfilled. Which formula should he follow?

    When I was a kid, I used to watch the skylarks rise up to the Sun every morning, as far as they could go; and sing and sing and sing!

  10. I believe Milton Friedman was an advocate of a negative income tax to provide a floor of income to everyone, so if my memory serves me, this is hardly a radical leftist idea.

    I have always felt that a truly successful capitalism would eventually lead to a society in which no one has to work and would be free to do pretty much as they like. But this is, of course, very similar to the eventual aims of communism.

    For instance, for some years I was an ardent rock climber, and I was and still am an ardent chess player. Ideally, I could choose to pursue either of these sports without having to worry about making a living. (Well as I am now old and retired I am theoretically free to do either, but age and infirmity are having their inevitable say about that.)

    Eventually a jobs based economy will have to transform itself into another kind of economy where machines do all the work and people can pursue their interests, whatever they may be.

    But of course that’s long term. Right now we are in a low demand recession and MMT is probably the best way out in the short term. Because if we don’t pull ourselves out of the current mess there may be no long term to worry about.

    But, at least for those people who remain on our current planet, the economy, socialist or capitalist, has to eventually figure out how to sustain itself into the indefinite future.

  11. “My view is that it would be possible to assist a transition to a society in which individuals are largely free to spend their time as they please…”

    I guess the big question is: would most people really choose to spend their time any differently than they do now (i.e. working at jobs they supposedly ‘hate’)?

    My guess is: no. Most people would choose to work the same old jobs even if they were given the option of not doing so (which they implicitly have since the inception of social welfare… nay… the Poor Laws).

    This question — as so many questions have in the recent past on this blog — call into question basic aspects of human nature. Do people who say they dislike like working really dislike working? I think not. Sit down for a beer with most men and listen to them complain about women… until they get up and go back home to their wives. Same deal with their jobs.

    Sure, an ‘options-based system’ that allows us to choose what we do is preferable. But I would argue that it already exists. If you really want to do something, you’ll do it. If you don’t… well, get a job and complain about it frankly!

    I think the JG is eminently realistic in that it ensures that people who otherwise would find it difficult to get a job due to (a) institutional prejudice or (b) high levels of real unemployment, can be allowed to take a position in society that genuinely gives them the dignity and the self-respect that they both crave and deserve. Because THAT is the truth of what people supposedly ‘want’. They want the opportunity to prove to the rest of society that they are productive creatures that can add to what we already have.

    I’ve been attacking the Labour Theory of Value as being moralistic nonsense on this blog for a week or two now. I stand by that. It is, from an analytical point of view, moralistic nonsense. But if the morality of the LTV means anything — and I think it does, albeit it being redundant from the POV of analysis — it means that people value their own labour inputs because others value their labour inputs. It is the respect and self-respect that people garner from their labour. If Marx gave us a metaphysical doctrine and we must take from it something then let it be this: that giving people the opportunity to WORK is more important than anything else.

  12. All great food for thought. I think we all need to think a great deal more about what kind of society we want to head towards and maybe spend a bit less time criticizing the horrendous one in which we all currently live.

    The tremendous truth is that we have the wherewithal today to live in something reasonably close to utopia. Utopian thinking isn’t therefore “utopian”.

    My personal inclination is that we should think down the lines of a “free economy”. Everything or virtually everything should be free. With the advances of computer technology, it’s not hard to imagine sophisticated software linking demand with supply and therefore negating the argument that the “market” is the best possible signal.

    If the fundamental value is egalitarianism, then it’s not a far step to make everything “free”. Democratic methods could be utilized to allocate goods that are more costly in terms of labor time but for most of our daily needs there seems little value in maintaining the idea of “paying” for something.

    We’re clearly moving toward a highly automated world and we should strongly encourage it. I think we need to recognize though that part of everyone’s societal responsibilities would be a moral requirement to put in a fair share. We have a responsibility to chip in. I don’t think it would even need to be a legal requirement. Humans aren’t lazy by nature and most have a desire / need to contribute. But the number of days / hours of work shouldn’t be very large considering our technology and how many current jobs could be eliminated as unneeded. Most sales, lawyers, accountants, tax experts, economists, and the list goes on. Not to mention the very many who labor every day to produce luxury yachts, corporate jets, etc, etc.

    This is just a short blog comment and so I won’t go on further. My thought though is that most of us probably spend a fair number of hours regularly thinking on our own about how to advance to a better world. That’s a bit of a waste though as we’d be far stronger if we combined our efforts. Is it absurd to think of combining resources and working together in a project that would try to make a sound case for “utopia”? Or is that madly beyond our pay grade?

  13. @ Philip P.

    A couple across the street from where I was living several years ago won the state lottery and choose to take the lump sum after taxes. It amount to USD 20 million. He is still working the same job since he loves it; he’s a tradesman that works with his hands and enjoys his craft. She, a nurse, called in and told her employer to fuck off as soon as the check was in their hands. So I guess it depends on circumstances.

  14. @ Jim

    I like to frame it as creating ideal society. What would an ideal society look like. What are the criteria. Etc.

    An economy is the material life-support system of a society. It’s only one aspect of an ideal society, but a utopia cannot exist without distributed prosperity. So, while there are a lot of other factors to consider, an economics of ideal society is a sine qua non.

  15. @Tom,

    What is our conception of an ideal society is a great starting point. I don’t like to use the word “economy” as it tends to imply a separation from society. My belief is that an ideal society begins on an egalitarian communitarian basis.

  16. ” The natural result would be that they would agree to reduce their work load and output so that they could still enjoy all the goods and services they actually need and want, but also enjoy more leisure time.”

    The underlying assumption to that statement is that the work is distasteful and that they would choose to do something else with the time instead.

    And yet if the work is distasteful, that is very likely to be the first thing to be replaced by a machine – since it would be expensive to get people to do it.

    So it doesn’t add up. As machines get better and better, the work that is left is the work that we love.

  17. Peter: In your first paragraph you claim that JG is part and parcel of MMT, and then question the “merits of JG compared with other policy options”. Isn’t the latter phrase an admission that JG is NOT NECESSARILY the best option and thus that JG is not necessarily part and parcel of MMT?

  18. Hi Ralph. It is the originators of MMT who have indicated a JG is integral to MMT. I am simply acknowledging that this is their conception of the approach, and saying that I will not take issue with their position on this point. Having said that, in comparing a JG to other approaches, the only policy approach I suggest may be better (a JIG) still involves a JG. It is just that it is voluntary and combined with a BIG.

    If I had suggested that JG is integral to MMT but not at least part of the best option, I would have been disagreeing with MMT, not the claim of the originators that a JG is integral to MMT. For what it’s worth (nothing), in a recent post I mentioned that it is no longer clear to me that my views entirely fit with MMT:

    Clarification on the Nature of this Blog

  19. This really is a good discussion. Everyone is outdoing themselves. :-)

    Jim wrote:

    My thought though is that most of us probably spend a fair number of hours regularly thinking on our own about how to advance to a better world. That’s a bit of a waste though as we’d be far stronger if we combined our efforts. Is it absurd to think of combining resources and working together in a project that would try to make a sound case for “utopia”? Or is that madly beyond our pay grade?

    I like this idea. I have also been thinking that we need to be putting more time into a positive contribution of where we are going rather than just the negative critique of where we are. The latter is very important for seeing what needs to change, but the negative critique is already pretty much clear thanks to the work of great thinkers of the past and present. The positive contribution, in contrast, is nowhere near as developed.

    Right now, I am enjoying exploring some of the links provided by Clonal Antibody and Tom Hickey in recent threads, which do consider these issues. I’m not sure about anyone else, but the topic is not one I am well read in, so perhaps a preliminary step, at least for me, is to do a little background reading.

  20. Bill Mitchell makes it clear here that the choice in macro is between a buffer stock of employed or a buffer stock of unemployed in Whatever – its either employment or unemployment buffer stocks. This is the case since there are very few net export economies whose domestic private sectors save very little, therefore providing continuous full employment through the private sector alone. In all other cases the government has to step in and offset the demand leakage to savings or there will not be full employment.

    Why not just use the sectoral balance approach and functional finance to arrange the offset by government expenditure, e.g., through countercyclical infrastructure spending as many Post Keynesians propose? According to MMT economists, its a distributional problem as well as an issue of aggregates. Practically speaking, it is virtually impossible to eliminate unemployment at the bottom because government NFA injections do not make their way down there unless they start there.

    So there is choice between an uncompensated buffer stock of employed (Dickensian times), a compensated buffer stock of unemployed (transfer payments like unemployment insurance and the dole), or a compensated buffer stock of employed (JG).

    The MMT argument is that a compensated buffer stock of employed is more efficient and effective way to deal with the unemployment arising from a lack of private sector hiring. Bill Mitchell has given the accounting to show it in terms of waste that otherwise builds up as human resources degrade.

  21. Great discussion. This is a reply to part of Dan Kervick’s comment:

    “It is unfair to ask those who are working to support those who are not contributing, but who are capable of doing so. It is unfair to hand out social benefits to able-bodied people if they are not reciprocating by contributing their own work to the productive efforts that make those benefits possible.”

    Dan, the problem with this is to define who is contributing and who is not. There are many people who are very well-paid in nominal terms, but not only do not contribute; but contribute negative well-being. This has always been the case; yet if there are activities are not illegal we allow them to practice those activities and to extract resources from people who cone under their sway. Apart from these cases, and considering a society which offered private employment, a job guarantee, and also an income guarantee to those who did not want to take the job guarantee; what makes us think that those who were using a formal job guarantee program would be contributing more than others who were using the income guarantee program? We can easily conceive of situations where someone using an income guarantee would produce greater value for society than someone using a job guarantee.

    For example, let’s imagine that Germany around the turn of the 19th century had both types of guarantees, and Einstein felt he would be better off practicing physics if he relied on the income guarantee rather than the job guarantee, and that, in fact, there was no job guarantee role he could have occupied that would have provided as much time to do physics as the income guarantee. In a situation like that, having hindsight, of course, would we be prepared to say that it was better for society to have Einstein take employment as a patent office clerk, or to take a job guarantee as an elder care provider, rather than having him live off the income guarantee, and be free to spend his full time generating the Special Theory of Relativity?

    Projecting to today, neither the private sector nor the Government is infallible in its judgments about which jobs and roles produce value, and which do not, or about which individuals are producing value and which are not in their individual activity. So, why should we rely completely on either the market or the Government to make these judgments?

    Why shouldn’t we accept instead that individuals who would rather be free from working either for the private sector or for the Government still have the right to a decent living? Are they not human beings? Is there no possibility that people who make such a choice aren’t contributing value to society or that they might do so in the future?

    I can see the logic of the point of view you’ve stated, Dan, in societies that are characterized by scarcity and a limited ability to generate valued outcomes. But we live in a land which continues to generate great real wealth and which can generate an unlimited amount of nominal wealth. Why isn’t it fair that some of that go to people who don’t want to contribute in the ways prescribed by authorities, but who want to follow their own stars and perhaps contribute in their own ways?

    “To provide an income to people is to provide them with a claim on the output produced by the society. I don’t see why anyone should be given title to such a claim if they are not reciprocating and are instead living solely for themselves.”

    I do. I don’t think that very many people can live solely for themselves, even if they intend to do so. “Man is a social animal,” and he or she always lives in a network of others and has an impact for good or ill on that network. People do not stop contributing for good or ill because they neither work at roles determined by the private sector nor by a Government. They are still part of the web we humans weave, and I think they have a right to decent living to pursue their brand of happiness, especially in a society that has enough wealth to make that possible.

    Keeping a society going is hard work. Even preserving and sustaining the things we already have is hard work, apart from whether we want to build more. People need to ask themselves, are they part of the society or not? If they are, they they need to accept the adult responsibility of shouldering a fair share of the work. Maybe some people don’t want to volunteer for the sandbag crew that is fixing the levee. Fine. But then they shouldn’t just drop by for the coffee and doughnuts when the volunteers deliver them to the people who are doing the heavy lifting.”

    I really think this is a faulty image full of loaded words. When there’s a flood I think everyone should volunteer for the sandbag crew if needed. But when there is no flood and no scarcity, and when there are plenty of people who have a “legitimate claim” on society’s bounty while they do sanctioned work that is destroying that bounty and contributing to society’s unsustainability, I don’t think there’s any cogent justification for not giving at least some of the coffee to people who just stop by.

    In short, I like PeterC’s proposal, and think that the real issue here is whether the combination of a JG program and a BIG program would provide the buffer stock needed to contain inflation while it provided full employment. If it would do so, then I think there’s no conflict with MMT at all. But that’s research question right now, and ultimately an empirical question, isn’t it?

  22. Joe, great comment. As I mention in the next thread, I think you have expressed the case better than I have. One point that comes through very clearly is that there is productive output, which takes many different forms, and then there is productive output as measured narrowly in the national accounts. The former is really the true but unobservable output, but we are only recognizing productive contribution if it is monetary and enters the national accounts, even though some of this output is not actually very socially beneficial and quite often is of negative value. (Apologies for the paraphrase, in this paragraph, of my other comment.)

    Regarding whether the JG when part of a JIG would match the ‘conventional’ JG specifically as a nominal price anchor, I think it would clearly be better. The reason I say this is that the JG wage’s effectiveness as a nominal price anchor is dependent on how much competitive pressure JG workers are placing on workers in the broader economy. Since JG workers in the JIG will only be those keen to participate, their effort and efficiency can be expected to be higher. The JG wage would therefore be going to workers more intent on producing good results for the JG provider. Therefore, the premium that employers would need to pay workers in the broader economy would be smaller, since losing dissatisfied workers during an upturn and needing to replace them with JG workers would be of less concern than if workers in the JG program were typically less committed.

  23. Thanks, PeterC. This:

    “Regarding whether the JG when part of a JIG would match the ‘conventional’ JG specifically as a nominal price anchor, I think it would clearly be better. The reason I say this is that the JG wage’s effectiveness as a nominal price anchor is dependent on how much competitive pressure JG workers are placing on workers in the broader economy. Since JG workers in the JIG will only be those keen to participate, their effort and efficiency can be expected to be higher. The JG wage would therefore be going to workers more intent on producing good results for the JG provider. Therefore, the premium that employers would need to pay workers in the broader economy would be smaller, since losing dissatisfied workers during an upturn and needing to replace them with JG workers would be of less concern than if workers in the JG program were typically less committed.”

    This is an interesting theory, but I really don’t believe it. It’s the kind of stuff you see from neoliberal economists who believe in simple incentive theories. I don’t I believe that the incentive structures of people are complex, and that people who take a JG rather than a BIG may not be prepared or more capable of being any more efficient than those who make the opposite choice. I like the JIG proposal. But I like it because it increases freedom, and, I think will give people who don’t like coercive labor situations to be more “productive” in the broad value sense of that term, because they’ll be happy to live on a decent BIG and use it to follow their avocation.

    Remember that a few blogs ago, you accused yourself of being a “communist.” But a real “communist” would want to justify the BIG in terms of greater freedom, rather than in terms of efficiency.

    Also, the JIG is attractive as something to try. Just because if it does work, it can increase freedom.

    I’m kind of interested in trying cutting back on the standard work week while raising the minimum wage, so that there’s no loss of income and then also trying the JIG at the same time. I bet that would knock out unemployment pretty quickly.

  24. Joe, good points. My motive for suggesting the JIG is the same as you: that it would increase freedom.

    However, an academic argument that the MMTers give for their view that a JG is a more effective nominal price anchor than the NAIRU approach or a BIG is that the JG workers will be kept more “job ready” and so will be more attractive to employers than unemployed workers. My point – strictly on this nominal price anchoring aspect – is that a voluntary JG as part of a JIG would, on the same logic, be more effective in this respect, because (i) workers want to participate in it and (ii) employers will know that they must want to participate in it.

    That is not my motive for suggesting the JIG. It is just a point of logic addressed to the academic MMTers’ nominal price anchoring argument in favor of the JG rather than a BIG.

    I completely agree that some people who opt out of the voluntary JG would undertake more socially productive activity than the JG workers, simply because some of them would have special talents or abilities that could be expressed when freed from the wage labor relation. These people, if essentually compelled to participate in a JG, may very well be diligent out of a sense of responsibility to do their best. But I also think it is likely that there will be other people (not necessarily or even usually from the same group) who would resent being in the JG program. Maybe this group would be insignificant in size, which would defeat my point of logic. I really don’t know.

    Maybe I made too much of the nominal price anchoring role. The reason I made the point is that the academic MMTers make a big thing about this, and I wanted to counter it in defending the notion of a JIG.

  25. Addendum to last comment: I am not suggesting the “job ready” argument is the only one the academic MMTers stress. They attach greater importance to the human costs of joblessness than just this “job ready” aspect. But I think I have addressed the argument about the human costs of joblessness as well in this and related posts. By providing a choice, the JIG would enable a transition to less wage labor without doing so more rapidly than people desire.

  26. You’re welcome, Joe. It’s the quality of the contributions, such as your own, that make the great discussions possible. Cheers.

  27. ANYBODY WHAT TO WRITE OR EDIT A BOOK ON THE DEBATE BETWEEN A GUARANTEED JOB OR INCOME?

    I’m series editor of the Palgrave-Macmillan book series, “exploring the basic income guarantee,” and we’d love to have a good, academic book on whether to guarantee a job or an income or both. If anybody out here is interested, send me an email at karl at widerquist dot com.

  28. peter,

    Looking at the income guarantee against the job guarantee from the ‘work’ angle (assuming for the moment that the basic income provided by both is the same for the ‘work’ and ‘non-work’ categories), it seems to me that it boils down to the level of social pressure there is on people to do productive work.

    So for Income Guarantee proponents the individuals will start doing work and other productive activities as a result of the market with no government involvement in organisation or provision, whereas with the Job Guarantee there is some government involvement and possibly some increase in social pressure to do productive work.

    Now if you think about it we already have a category of people on an Income Guarantee. They are called ‘pensioners’ and are receiving the age-related state pension. So it might be useful to see how many pensioners end up doing productive work voluntarily and see what they add to the pot. (The classic one is childcare services – allowing others to work).

    Income Guarantee seems to me to be moving towards applying the age-related pension income mechanism to everybody, or at least to everybody the private sector decides are ‘not needed’.

    Of course one of the arguments for increasing aggregate demand is actually to reduce the pension age and allow more people to retire earlier. Yet the push in many countries is to increase the pension age, which can only make things worse surely.

    I think it would be useful to bring in the age-related pension systems into the debate about Income Guarantee and Job Guarantee. It seems that they are all related.

  29. Good thought, Neil.

    I think the YouTube link you provided on intrinsic motivation earlier in this thread is also pertinent. In particular, the evidence that financial incentives are only effective for menial/repetitive tasks and often irrelevant or even counterproductive in other cases seems significant given that the former roles are the easiest to mechanize. A BIG would free people to take rewarding jobs, even if low paid or voluntary, and turn down lousy jobs. The latter jobs would disappear or be replaced by machines. The former jobs would be examples of where individuals exercise greater control over the productive use of their time.

  30. There’s a lot of reading that I need to do before I can make full comments. I’d like to start with issues of need, universality, selfishness and moral hazard. I the UK the government is following a typical divide and rule tactic by stigmatising benefit recipients. There is support for this tactic in the working population because many feel that they don’t benefit from state promises and there is some justification to their beliefs. The benefit system in the UK is based on the concept of priority need, i.e. those in the most need get the state benefits. Unfortunately this creates incentives to be needy. In practice there are many examples of the inverse care law because need is not self-evident and people selfishly game the benefit system.

    http://en.wikipedia.org/wiki/Inverse_care_law

    I would like to see the concept of universality in all state promises. This appears to be a simple solution to the perverse incentives of priority need. In practice this would mean that everyone receives a state income regardless of current income, everyone has access to state housing regardless of current housing conditions and everyone has access to a job guarantee regardless of employment status. The main objection to universality has been funding. MMT has its arguments on this but there is also an efficiency argument on cost. Universal promises are more efficient, have no moral hazard, encourage social cohesion, strengthen the social contract, provide basic security in relation to need and increase opportunities.

    There used to be several universal promises in the UK but retirement income is now the last.

  31. Hacky: “This appears to be a simple solution to the perverse incentives of priority need. In practice this would mean that everyone receives a state income regardless of current income, everyone has access to state housing regardless of current housing conditions and everyone has access to a job guarantee regardless of employment status.”

    It’s interesting. That’s the deal that religious workers get from their institutions. I was educated by people like that and they were truly great people, highly dedicated, well-trained, and motivated to produce superior outcomes.

    This model shows it can work. But, as I keep coming back to, the model also shows that it’s largely a matter of level of consciousness in addition to culture and institutional design.

  32. re. Tom Hickey

    I suppose I think of consciousness as another aspect of learning. If so, it’s one of the most evolved and productive forms of learning. I’ve mentioned that I believe humans are a meta-species. Our interference with our own evolution will continue to accelerate exponentially. I would also suggest that consciousness is the first of the new meta-evolutionary processes (a meta-evolutionary process being a process that creates new evolutionary processes).

    As you know I’m very biased towards information growth. I favour an institutional design that maximises opportunities which I also believe would accelerate collective consciousness. There’s an element of fantasy football in the discussions but there’s still a useful purpose. These discussions are just one example of the general principle of the path tracing pattern of learning.

    In terms of practical action I like the approach advocated by Paulo Freire. This is because examining my own actions is achievable for me.

    http://en.wikipedia.org/wiki/Critical_pedagogy

    With regards the job/income guarantee, I’m opposed to any government action that’s based on a factory model stamping out people in a standard mould. This is very common in the UK where a decision is made centrally and then replicated thousands of times throughout the country.

  33. Maybe “fantasy football” is too British. It has a similar meaning to “dream team”.

  34. There’s a self-augmenting and autocatalytic process between hardware and software. Hardware capacity is necessary for developing software potential, and increasing actualization of software spurs hardware innovation. Evolution of organisms proceeds on similar lines.

  35. Hacky: “I’m opposed to any government action that’s based on a factory model stamping out people in a standard mould.”

    It’s uncreative and anti-evolutionary. Leads to an evolutionary dead-end of hive behavior.

  36. Good discussion. Hacky, I agree with you completely on universality; guaranteed income, housing, job; and opposition to factory model.

  37. re. Tom Hickey

    Your post on consciousness reminded me of the co-ops that I was in. There were quite a few people who got involved in them on the basis that they might profit by doing very little. These were Rochdale model co-ops with evenly split profits and democratic decisions. This model created a perverse incentive to withhold labour while maintaining minimal participation. This behaviour was very damaging for the group.

  38. This is something that an astute community figures out quickly and deals with or Gresham’s law applied to sociology predicts that the leaners will drive out the doers. There have to be filters to weed out or reform the leaners. Classic “free rider” problem that capitalism overreacts to and deals with overly harshly. In the Communist world it was called “re-education.” That, too, got a bad name as being just indoctrination through force. There are better ways of dealing with it. Most parents have to deal with it in the process of socializing their kids, for example. When parents don’t do this successfully, the problem persists in life until it is corrected. It’s cruel to dismiss the potential of people who were badly brought up and miseducated, blaming it instead on a character defect. Instead of presuming a character defect is at fault, the issue should be dealt with maturely.

  39. I came to the conclusion that a JG/BIG combo is the way to go before I heard of your JIG. Great minds think alike !

    My motivation is a little different than yours — I see the conventional JG proposal, where safety net benefits are terminated if the individual refuses a JG job for whatever reason, as inhumane and something that could easily be turned into a form of punishment, even though MMT’ers don’t intend it that way.

    As you point out, having the no-questions-asked BIG available for people to fall back on makes the JG truly voluntary, as it should be.

    I only suggest that the JG pay 20% – 25% more than the BIG, enough to cover transportation costs and still provide a financial incentive to participate in the theoretically more productive JG.

    People would still have a financial incentive to participate in the private sector since the private sector would have to pay more than the JIG, so maybe the pay differential is not necessary. But have it just in case.

    Of course it is not politically viable at the moment, but then what is ? If we’re going to dream, dream big and bold.

  40. I suspect that there would have to be reward discrepancy between the BIG and JG to create an incentive to accept the JG rather than the BIG. That could affect the political viability.

    Now that most of the world is suffering from over-production and under-employment, I think that the idea has a lot more political viability than many seems to think. It’s a point I would not concede without evidence.

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